The FSA has confirmed it will include a cost-benefit analysis and an impact analysis in its June RDR consultation paper, easing concerns from advisers it would be delayed further.
Sesame executive chairman Ivan Martin says it is critical that the analysis goes into full detail on all the key cost areas, as advisers face higher regulatory fees, increased capital adequacy requirements as well as the cost of sitting more exams.
Martin is calling on the FSA to consider what proportion of advisers will leave the industry as a result of the RDR and what will happen to their clients. He says: “One of the FSA’s arguments for backing away from preventing tied advisers, like banks, from providing advice was to avoid orphaning existing clients who need ongoing advice.”
He also questions what will happen to the trail commission for ongoing advice that those who leave the industry will no longer be authorised to provide.
Martin would like to see the cost-benefit analysis cover the impact of adviser charging on regular-premium business and the costs for providers. He claims it is “counter-intuitive” to load advisers with a heavier burden when small businesses are already struggling.
He says: “A full cost-benefit and impact analysis from the FSA is the least we can expect.”
Paladin Financial Services managing director Tim Purdon agrees that a cost-benefit and impact analysis is needed.
He says: “I have concerns that many people will miss out on receiving independent financial advice. What will happen to people who are too poor or who are not prepared to pay for advice?”
Sense Network chief executive Tim Newman says a cost-benefit analysis is essential. He says: “Costs incurred by the regulator or by regulatory change need to be weighed up against the benefits for firms who are already in survival mode.”